Hong Kong Monetary Authority - Remarks after the US Fed FOMC Meeting

Speeches

27 Jul 2023

Remarks after the US Fed FOMC Meeting

Arthur Yuen, Acting Chief Executive, Hong Kong Monetary Authority

The Federal Open Market Committee of the Federal Reserve (the Fed) announced a rate hike of 25 basis points early today (Hong Kong time), raising the target range for the federal funds rate to 5.25-5.5%. The HKMA has adjusted the Base Rate upward to 5.75% according to the established mechanism with immediate effect.
The 25-basis-point rate hike is in line with market expectations. The Fed has raised the federal funds target range by a total of 525 basis points since March last year. However, inflation in the US remains high, and the high interest rate environment may last for some time. The future interest rate path will be contingent on incoming inflation and employment data, as well as the impact of earlier rate hikes on the economy.
Under the Linked Exchange Rate System (LERS), Hong Kong dollar interbank rates generally track their US dollar counterparts. As the US continued to raise interest rates, Hong Kong dollar interbank rates have gradually risen in recent months. The public should be mindful of interest-rate movements and relevant risks when purchasing property, taking out mortgages or making other borrowing decisions.
The Hong Kong dollar exchange rate has strengthened in recent months, not only driven by dividend payment-related demand from listed corporations, but also reflecting the effective operation of the automatic interest rate adjustment mechanism under the LERS.
The HKMA will continue to closely monitor market developments and maintain monetary and financial stability.

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